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Federal Pharmaceutical Spending

Addressing High Federal Spending on Part D Catastrophic Coverage

Lead Investigators:  Aditi Sen, Bill Padula

Rising prescription drug expenditures are a growing concern for Medicare. In 2015, Medicare spent $137 billion on prescription drugs through Part D. Over time, an increasing portion of this spending is occurring in the catastrophic portion of Part D; indeed, recent evidence has shown that this spending has increased three times faster than overall Part D spending in the past decade with catastrophic spending exceeding $33 billion in 2015. Spending on high-priced specialty drugs is responsible for most of the increase and now makes up two-thirds of Part D catastrophic spending, compared to one-third in 2010. Ensuring beneficiary access to necessary drugs as well as the financial future of Medicare Part D is likely to require a multipronged policy approach. In this project, we aim to understand the types of drugs driving increased catastrophic drug spending, how PDPs are responding to these high costs, and implications for Medicare beneficiaries. Our goal is to propose evidence-based policy alternatives to address the high and growing spending on Part D catastrophic coverage and ensure that Medicare maintains financial sustainability and beneficiaries can access necessary medications.

Examining Drug Formulary Differences Between Medicare, the DOD and the VA

Lead Investigators:  Ge Bai, Mariana Socal

Medicare is not allowed to negotiate drug prices or to establish a drug formulary. Instead, each prescription drug plan (PDP) negotiates prices directly with manufacturers and establishes its own drug formulary. The Department of Veterans Affairs (VA) and the Department of Defense (DOD) negotiate prices with manufacturers and have drug formularies that apply to services and beneficiaries across the nation, and beneficiaries can still access drugs outside of the formulary through drug requests filled by physicians. In this project, we examine the degree of overlap across the PDP formularies and between drugs that are currently covered under PDPs, DOD, and the VA formularies. We also examine what drugs are included in most of the PDP formularies and which drugs are unique to only a few PDP formularies.

Variation in Drug Prices Paid by Federal Agencies

Lead Investigators:  Ge Bai, Mariana Socal

In the U.S., different federal agencies pay different prices for purchasing the same prescription drug. While the Medicare program is not allowed to negotiate drug prices with drug manufacturers or establish a formulary, the Department of Veteran Affairs (VA) and the Department of Defense (DoD) design their own formulary and negotiate directly with drug manufacturers. Consequently, the Medicare program is expected to pay a higher price for the same drugs than VA or DoD drug plans. As the list price of brand-name drugs increased dramatically in recent years, it is imperative for policymakers to have an up-to-date understanding of the extent of price variation across federal agencies for the same prescription drugs and an estimated range of savings that could be potentially achieved if federal procurement were to be consolidated or standardized. This project aims to produce these deliverables to facilitate policy decision-making.